A CONTRACT ALLOWING EMPLOYER TO TERMINATE EMPLOYEES WITHOUT CAUSE IS VIOLATIVE OF THE RIGHT TO SECURITY OF TENURE

Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation
G.R. No. 205727, January 18, 2017

Facts:

Grand Placement and General Services Corp. (GPGS) is a licensed recruitment or placement agency in the Philippines while Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the other hand, Industrial & Management Technology Methods Co. Ltd. (ITM) is the principal of GPGS, a company existing in Saudi Arabia.

GPGS, for and on behalf of ITM, employed Dagasdas as Network Technician. He was deployed in Saudi Arabia under a one-year contract. Before leaving the Philippines, Dagasdas underwent skill training and orientation as Network Technician.

Nonetheless, his Job Offer indicated that he was accepted by Aramco and ITM for the position of “Supt.” Dagasdas contended that although his position under his contract was as a Network Technician, he actually applied for and was engaged as a Civil Engineer considering that his transcript of records, diploma as well as his curriculum vitae showed that he had a degree in Civil Engineering, and his work experiences were all related to this field. Purportedly the position of Network Technician was only for the purpose of securing a visa for Saudi Arabia because ITM could not support visa application for Civil Engineers,

Dagasdas arrived in Saudi Arabia. Thereafter, he signed with ITM a new employment contract which stipulated that the latter contracted him as Superintendent or in any capacity within the scope of his abilities. Under this contract, Dagasdas shall be placed under a three-month probationary period; and, this new contract shall cancel all contracts prior to its date from any source.

Dagasdas reported at ITM’s worksite in Khurais, Saudi Arabia. There, he was allegedly given tasks suited for a Mechanical Engineer, which were foreign to the job he applied for and to his work experience. Seeing that he would not be able to perform well in his Dagasdas raised his concern to his Supervisor in the Mechanical Engineering Department. Consequently, he was transferred to the Civil Engineering Department, was temporarily given a position as Civil Construction Engineer, and was issued an identification card good for one month. Dagasdas averred that on March 9, 2008 he was directed to exit the worksite but Rashid H. Siddiqui (Siddiqui), the Site Coordinator Manager, advised him to remain in the premises, and promised to secure him the position he applied for.

However, before Dagasdas’ case was investigated, Siddiqui had severed his employment. Dagasdas returned to Al-Khobar and stayed at the ITM Office. Later, ITM gave him a tennination notice indicating that his last day of work was on April 30, 2008, and he was dismissed pursuant to clause 17.4.3 of his contract, which provided that ITM reserved the right to terminate any employee within the three-month probationary period without need of any notice to the employee.

Before his repatriation, Dagasdas signed a Statement of Quitclaim with Final Settlement stating that ITM paid him all the salaries and benefits for his services from February 11, 2008 to April 30, 2008, and ITM was relieved from all financial obligations due to Dagasdas.

Dagasdas returned to the Philippines. Thereafter, he filed an illegal dismissal case against GPGS, ITM, and Aramco.

LA Ruling:

The LA dismissed the case for lack of merit. The LA pointed out that when Dagasdas signed his new employment contract in Saudi Arabia, he accepted its stipulations, including the fact that he had to undergo probationary status. She declared that this new contract was more advantageous for Dagasdas as his position was upgraded to that of a Superintendent, and he was likewise given an allowance aside from his salary per month.

According to the LA, for being more favorable, this new contract was not prohibited by law. She also decreed that Dagasdas fell short of the expected work performance; as such, his employer dismissed him as part of its management prerogative. Consequently, Dagasdas appealed to the NLRC.

NLRC Ruling:

The NLRC issued a Resolution finding Dagasdas’ dismissal illegal.

The NLRC stated that Dagasdas, who was a Civil Engineering graduate, was “recruited on paper” by GPGS as Network Technician but the real understanding between the parties was to hire him as Superintendent. It held that GPGS erroneously recruited Dagasdas and failed to inform him that he was hired as a “Mechanical Superintendent” meant for a Mechanical Engineer.

It declared that while ITM has the prerogative to continue the employment of individuals only if they were qualified, Dagasdas’ dismissal ammmted to illegal termination since the mismatch between his qualifications and the job given him was no fault of his.

The NLRC added that Dagasdas should not be made to suffer the consequences of the miscommunication between GPGS and ITM considering that the government obligates employment agencies recruiting Filipinos for overseas work to “select only medically and technically qualified recruits.”

The NLRC denied the Motion for Reconsideration. Undeterred, GPGS filed a Petition for Certiorari with the CA ascribing grave abuse of discretion on the part of the NLRC in ruling that Dagasdas was illegally dismissed.

CA Ruling:

The CA set aside the NLRC Resolutions and reinstated the LA Decision dismissing the case for lack of merit. The CA could not accede to the conclusion that the real agreement between the parties was to employ Dagasdas as Superintendent. It stressed that Dagasdas left the Philippines pursuant to his employment contract indicating that he was to work as a Network Technician; when he arrived in Saudi Arabia and signed a new contract for the position of a Superintendent, the agreement was with no participation of GPGS, and said new contract was only between Dagasdas and ITM.

It emphasized that after commencing work as Superintendent, Dagasdas realized that he could not perform his tasks, and “[s]eemingly, it was [Dagasdas] himself who voluntarily withdrew from his assigned work for lack of competence.” It faulted the NLRC for falling to consider that Dagasdas backed out as Superintendent on the excuse that the same required the skills of a Mechanical Engineer. In holding that Dagasdas’ dismissal was legal, the CA gave credence to Dagasdas’ Statement of Quitclaim and Final Settlement.

It ruled that for having voluntarily accepted money from his employer, Dagasdas accepted his termination and released his employer from future financial obligations arising from his past employment with it.

The CA denied Dagasdas’ Motion for Reconsideration. Hence, Dagasdas filed the Petition with the SC.

Issue/s:

Whether or not a stipulation that the employee can be terminated within a period of three months without notice is valid

Whether or not the execution of release and quitclaim amounts to waiver of the right to pursue an action

SC Ruling:

The SC found merit in the petition.

It is well-settled that employers have the prerogative to impose standards on the work quantity and quality of their employees and provide measures to ensure compliance therewith. Non-compliance with work standards may thus be a valid cause for dismissing an employee. Nonetheless, to ensure that employers will not abuse their prerogatives, the same is tempered by security of tenure whereby the employees are guaranteed substantive and procedural due process before they are dismissed from work.

Security of tenure remains even if employees, particularly the overseas Filipino workers (OFW), work in a different jurisdiction. Since the employment contracts of OFWs are perfected in the Philippines, and following the principle of lex loci contractus (the law of the place where the contract is made), these contracts are governed by our laws, primarily the Labor Code of the Philippines and its implementing rules and regulations.

Dagasdas’ new contract is in clear violation of his right to security of tenure. The Labor Code (re-numbered), under Article 297 [formerly Article 282], provides the just causes for dismissing an employee. However, per the notice of termination given to Dagasdas, ITM terminated him for violating clause 17.4.3 of his new contract which states that:

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“The Company reserves the right to terminate this agreement without serving any notice to the Consultant in the following cases:

xx xx

17.4.3 If the Consultant is terminated by company or its client within the probation period of 3 months.”

Based on the foregoing, there is no clear justification for the dismissal of Dagasdas other than the exercise of ITM’s right to terminate him within the probationary period. While the Civil Code recognizes that parties may stipulate in their contracts such terms and conditions as they may deem convenient, these terms and conditions must not be contrary to law, morals, good customs, public order or policy.

The above-cited clause is contrary to law because as discussed, the Constitution guarantees that employees, local or overseas, are entitled to security of tenure. To allow employers to reserve a right to terminate employees without cause is violative of this guarantee of security of tenure.

Moreover, even assuming that Dagasdas was still a probationary employee when he was terminated, his dismissal must still be with a valid cause. As regards a probationary employee, his or her dismissal may be allowed only if there is just cause or such reason to conclude that the employee fails to qualify as regular employee pursuant to reasonable standards made known to the employee at the time of engagement.

Here, ITM failed to prove that it informed Dagasdas of any predetermined standards from which his work will be gauged. In the contract he signed while still in the Philippines, Dagsadas was employed as Network Technician; on the other hand, his new contract indicated that he was employed as Superintendent.

However, no job description -or such duties and responsibilities attached to either position -was adduced in evidence. It thus means that the job for which Dagasdas was hired was not definite from the beginning. Indeed, Dagasdas was not sufficiently informed of the work standards for which his performance will be measured. Even his position based on the job title given him was not fully explained by his employer. Simply put, ITM failed to show that it set and communicated work standards for Dagasdas to follow, and on which his efficiency (or the lack thereof) may be determined.

The new contract was not shown to have been processed through the POEA. Under the Labor Code, employers hiring OFWs may only do so through entities authorized by the Secret.my of the Department of Labor and Employment. Unless the employment contract of an OFW is processed through the POEA, the same does not bind the concerned OFW because if the contract is not reviewed by the POEA, certainly the State has no means of determining the suitability of foreign laws to our overseas workers.

This new contract also breached Dagasdas’ original contract as it was entered into even before the expiration of the original contract approved by the POEA. Therefore, it cannot supersede the original contract; its terms and conditions, including reserving in favor of the employer the right to terminate an employee without notice during the probationary period, are void.

Third, under this new contract, Dagasdas was not afforded procedural due process when he was dismissed from work. As cited above, a valid dismissal requires substantive and procedural due As regards the latter, the employer must give the concerned employee at least two notices before his or her termination.

Specifically, the employer must inform the employee of the cause or causes for his or her termination, and thereafter, the employer’s decision to dismiss him. Aside from the notice requirement, the employee must be accorded the opportunity to be heard.

Here, no prior notice of purported infraction, and such opportunity to explain on any accusation against him was given to Dagasdas. He was simply given a notice of termination. In fact, it appears that ITM intended not to comply with the twin notice requirement. As above-quoted, under the new contract, ITM reserved in its favor the right to terminate the contract without serving any notice to Dagasdas in specified cases, which included such situation where the employer decides to dismiss the employee within the probationary period. Without doubt, ITM violated the due process requirement in dismissing an employee.

Lastly, while it is shown that Dagasdas executed a waiver in favor of his employer, the same does not preclude him from filing this suit. Generally, employee’s waiver or quitclaim cannot prevent the employee from demanding benefits to which he or she is entitled, and from filing an illegal dismissal case. This is because waiver or quitclaim is looked upon with disfavor, and is frowned upon for being contrary to public policy.

Unless it can be established that the person executing the waiver voluntarily did so, with full understanding of its contents, and with reasonable and credible consideration, the same is not a valid and binding undertaking. Moreover, the burden to prove that the waiver or quitclaim was voluntarily executed is with the employer.

In this case, however, neither did GPGS nor its principal, ITM, successfully discharged its burden. GPGS and/or ITM failed to show that Dagasdas indeed voluntarily waived his claims against the employer.

Indeed, even if Dagasdas signed a quitclaim, it does not necessarily follow that he freely and voluntarily agreed to waive all his claims against his employer. Besides, there was no reasonable consideration stipulated in said quitclaim considering that it only determined the actual payment due to Dagasdas.

Verily, said quitclaim, under the semblance of a final settlement, cannot absolve GPGS nor ITM from liability arising from the employment contract of Dagasdas.

All told, the dismissal of Dagasdas was without any valid cause and due process of law. Hence, the NLRC properly ruled that Dagasdas was illegally dismissed.